A combination of direct import controls on inessential items, reduction of petro-product prices, measures for reducing the consumption of such products, and direct taxation, especially on wealth, is the obvious way of getting out of the tailspin in which the Indian economy is currently caught. There is no alternative to these measures if we are to avoid the fate of countries that eventually run to the IMF and get caught in the vice-like grip of “austerity”.

The Indian Economy has all along been critically dependent upon the inflow of speculative finance to sustain its balance of payment. It now faces threatening prospects of a spiral as international crude oil prices and U.S. interest rates, that kept its import bill restricted, are on the rise.

As oil-producing countries, especially Saudi Arabia and Russia, stick to their reduced outputs and as Trump threatens to isolate Iran with sanctions once again, the spectre of high oil prices and the accompanying inflation seem very real.

The recent spike in the international prices of oil suggests that the recession-induced dip in oil prices may be behind us. Political uncertainty and financial speculation have trapped the world in a regime of high and rising oil prices.

Even before global currents caused relatively rapid outflows of mobile finance capital from India, the Indian economy was vulnerable on the external front. The recent pattern of growth that has been reliant on capital inflows to generate domestic credit-driven bubbles, rather than trade surpluses is not sustainable and makes the economy significantly more vulnerable.

For the global economy, August 2011 was a particularly bad month. A string of economic indicators released early that month suggested that close to four years after the onset of the global recession in December 2007 a sluggish world economy was set to sink again.

Recent price changes in global oil markets are increasingly affected by forces that have more to do with financial speculation and expectations than with current movements in demand and supply. In the current oil price surge, the real gainers are the financial speculators in oil futures markets and the big oil companies.

With the annual rate of inflation in India having touched 7 per cent on a point-to-point basis during the week-ending 22 March 2008, the search for policies to combat the price rise has begun. One factor seen as making that search difficult is the ostensible role of "imported inflation" in driving the rise in domestic prices. There is an obvious reason why such an argument arises.

In addition, the threats of terrorist attacks in the world's largest oil producer, Saudi Arabia, are growing and also have been increasingly realised in recent months. The nervousness this has created in world markets has not been neutralised by OPEC's promises of boosting production.

On 2 February 2003, the two month-old, private sector-led strike in Venezuela was lifted. That general strike was the culmination of eighteen months of unrest, during which a mainly capitalist opposition attempted to dislodge President Hugo Chavez.

The world economy is booming, with the US in the lead. Yet uncertainty generated by the high level of oil prices is spoiling the party. Officials and Ministers who gathered at Prague late September for the biannual meetings of the World Bank and the IMF had much to celebrate.

Exim policy 2000 does indeed mark a watershed, though not for the reasons advanced by the Commerce Minister. It begins the one year stretch during which India plans to dismantle all remaining quantitative restrictions (QRs) on imports. The announcement declares what India has been forced to accept because of US intransigence with regard to permitting India to maintain some QRs for reasons of balance of payments vulnerability. Restrictions on 714 of the 1429 items still subject to regulation have been lifted as of April 1st, and those on the rest would go in a year from that date.

Oil prices are once again the talking point in international economic and financial circles. In the wake of the third agreement between members of the Organisation of Petroleum Exporting Countries (OPEC) in March 1999 to cut production by 2.1 million barrels a day, oil prices have risen sharply from less than $10 a barrel (in the case of OPEC crude) to close to $25 a barrel.

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